Public Bill Committee

[Hugh Bayley in the Chair]
Written evidence to be reported to the House
EN 19 Dalestone Energy
EN 20 UK Youth Climate Coalition
EN 21 RWE npower
EN 22 National Grid
EN 23 Dong Energy
EN 24 Solar Trade Association
EN 25 Department of Energy and Climate Change

Clause 1  - General considerations relating to this part

Tom Greatrex: I beg to move amendment 29, in clause1, page2,line7,at end insert—
‘( ) The Secretary of State will report annually alongside the Annual Energy Statement to Parliament on the impact of exercising the functions by virtue of subsection (1) on the matters by virtue of subsection (2).’.

Hugh Bayley: With this it will be convenient to discuss the following:
Amendment 30, in clause2,page2,line29,at end insert—
‘( ) Regulations must include a statement by the Secretary of State setting out his opinion as to how the Regulations will—
(a) contribute to the reduction in emissions of greenhouse gases for each low carbon form of generation to which the Regulations apply;
(b) impact on consumer bills for each low carbon form of generation to which the Regulations apply;
(c) contribute to energy security for each low carbon form of generation to which the Regulations apply.’.
Amendment 31, in clause2,page2,line42,after ‘section’, insert ‘3’.
Amendment 37,in schedule 1, page97,line19, at end insert—
‘( ) Provision made in this regard must be laid before Parliament before the agreement of any compensation.’.
Amendment 38, in schedule 1,page97,line19, at end insert—
‘( ) The Secretary of State must set out the reasons why he believes the person subject to a scheme in this regard has been adversely affected.’.
Amendment 39,in schedule 1, page97,line19, at end insert—
‘( ) Provision made in this regard must identify the source of compensation paid by the Secretary of State.’.
Amendment 40, in clause5,page4,line39,at end insert—
‘( ) Regulations must include provision for—
(a) the Secretary of State to report annually to Parliament on the impact on consumer bills of provisions under this section; and
(b) the issuing of notices exempting energy intensive industries from the provisions under this section.’.
Amendment 50, in clause9,page6,line28,at end insert—
‘(h) for the information provided by virtue of paragraphs (a) to (c) to be laid before Parliament.’.
Amendment 51, in clause10,page7,line4,at end insert—
‘( ) Provision made in this regard must include provision requiring any new functions conferred on the Authority to be laid before both Houses of Parliament.’.
Amendment 52, in clause11,page7,line21,at end insert—
‘( ) The Secretary of State must report to Parliament following any provision made by virtue of subsection (1).’.
Amendment 60, in clause19,page11,line34,at end insert—
‘( ) The Secretary of State or the Authority will lay any report by virtue of subsection (4) before both Houses of Parliament.’.

Tom Greatrex: It is a pleasure to serve under your chairmanship, Mr Bayley. I am sure that after last week’s sittings you will have become more familiar with some of the issues that you will become hugely familiar with over the course of the next few weeks. It is a pleasure to consider the Bill in Committee. Many of its members either are currently or in the previous Parliament have been members of the relevant Select Committee and therefore will have considered these issues a number of times. However, while we may not be discussing new material, it is significant.
My hon. Friend the Member for Liverpool, Wavertree and I have tabled these amendments because, as we heard last week in our evidence sessions, there are still a significant number of concerns around the detail of the Bill and the intent and effect of its measures generally. That is partly because, as the Minister has said on a number of occasions, a great deal of the detail will be contained within secondary legislation. I would like to put on the record my disappointment that, despite the seeming commitment on Second Reading that some of that secondary legislation would be available in draft, the Minister has subsequently written to members of the Committee saying that that will not now be possible. It is partly for that reason that some of these amendments have been tabled; in the absence of that detail, it is essential that we, as the Opposition—and indeed, all members of the Committee—probe the Government on some of the Bill’s impacts. That will also help to provide some of the clarity that, as again we heard last week from numerous witnesses, we still need to get on this important piece of legislation. There is always a balance to be struck between flexibility and providing clarity, certainty and predictability. It will be a matter for the judgment of the Committee, and of the House more widely, as to where that balance should lie on a number of different issues in the Bill.
Amendment 29 would ensure that the Government reported to Parliament on the impacts of the measures in the Bill. The Government have a number of existing and pre-existing responsibilities and duties to report to Parliament on a range of different issues relating to energy policy. I think that every member of the Committee, if not every Member of the House, shares the broad agenda and desire behind the Bill: seeking to ensure that there is a renewal of our energy plant and that that is done in a way that maximises energy security, safeguards costs for consumers and businesses as far as possible and also, importantly, helps to ensure, along with other Government measures, that we do everything that we can to encourage the better use of energy and the reduction of energy waste. Given that, there are a number of objectives in the Bill that could be said sometimes to be more in competition than in co-operation.
For that reason we think it is important that, alongside the annual energy statement, the Secretary of State and the Department have a duty to report to Parliament on a regular basis on the impact that the significant measures contained in the Bill will have, in relation to consumers and the costs to consumers, security of supply and renewables targets and carbon reduction targets, which, as I have said, already exist. It is only with that complete, coherent and continual level of information that it will be possible, not just for Parliament to continue to hold the Government to account, but for the Government to be properly aware of the emerging impact of the policies in the Bill. It is also important for the wider industry that it sees the effect of what is happening. This is a good opportunity for the Government; it is an important way of ensuring that there is widespread understanding of the objectives and of the progress towards them.
Amendment 29 is tabled in a spirit of seeking to help the Government and also so that Parliament continues to be informed. I know that the Minister is particularly keen that Parliament continues to be fully aware of the Government’s objectives. It will also help to counter some of the messages about policy in this area from the Government—not necessarily intentional—that do not always seem to be co-ordinated. For those reasons, therefore, we think it is important to provide this level of information to Parliament.
Amendments 30 and 31 in my name and that of my hon. Friend the Member for Liverpool, Wavertree are tabled to ensure that a statement is provided by the Secretary of State on precisely how the regulations will contribute to the reduction of greenhouse gas emissions for all the forms of low-carbon generation for which contracts for difference will apply, as well as on the impact on consumer bills and the contribution to energy security. We have tabled these amendments for reasons similar to those outlined on amendment 29. We accept and agree that long-term contracts should and can provide investors with a degree of certainty. In evidence last week we heard a broad acceptance that, although different parties and industry groups recognise that the renewable obligation has played an important part in making the recent changes in terms of the energy mix, contracts for difference are an improvement. They are something which people wish to see in place. However, concern remained in those discussions about detail that was not present and about how the contracts for difference will work. We will get to more detail about that as we go through further clauses. While we hope that the overall effect of these amendments will be positive, it is important to ensure that there is a continual provision of information about the key strategic aims of energy policy and Government policy as a whole. We also tabled amendments 30 and 31 for these reasons.
There are a number of other amendments in this group. However, I want to ensure at the outset that there is proper discussion of these issues and that Parliament is kept fully informed as this legislation comes on to the statute book, not just for the Government’s sake but for those with a wider interest in these matters. I am sure that other members of the Committee will wish to comment, so at this point I will resume my place.

Barry Gardiner: It is a pleasure to serve under you as the Chair, Mr Bayley. I look forward to our proceedings over the next few weeks.
Now that we are into the Committee sittings proper, it may be strange to use this analogy, but, until this morning I never thought of how the Minister reminds me of Henry VIII. Now I see it: the square jaw and the facial characteristics. Not the beard, perhaps—he needs to learn how to grow one of those from me. The most striking feature, of course, is the latitude that the Bill affords the Minister: to come in at any stage with new definitions; to make new clauses; and to avoid any real scrutiny by the Committee of what the Government propose. I am not saying that I think that he has any desire to have six—or even more than one—partners in life, but I make the comparison quite simply because of the latitude that the Bill gives him and the Henry VIII clauses that it contains.
Let us look at the provisions. The Minister told us last week that the Bill had three purposes: security of supply, lower carbon emissions and tackling fuel poverty. Will it do that? We will discuss that in some detail over the next few weeks, but what an omission from this Bill it is that there is absolutely nothing about the way in which energy policy connects up with wider industrial policy. The Bill does not see energy policy as the engine of the economy’s growth, but as an isolated and separate part of the economy and of the Government’s programme. The Bill deals simply with those three issues.
Let us look at the latitude in the Bill in a little more detail. Clause 2 states that
“‘low carbon electricity generation’ means electricity generation which in the opinion of the Secretary of State will contribute to a reduction in emissions of greenhouse gases”.
My goodness! “Low carbon electricity generation” means whatever the Secretary of State thinks that it means. Can we not have a figure? Later on in the Bill, on emissions performance standard the Government give us the figure of 450 grams of CO2 per kWh. Is that the figure? Is that what low carbon electricity generation means? If so, why do we not put that in the Bill? The fact is that the Government want to play fast and loose with the whole concept; they want to be able to define it when and where it suits them.

Dan Byles: It is always a pleasure to listen to the hon. Gentleman speak on this policy area. Is he saying that it is Labour party policy to put specific figures in the Bill? If so, what are they?

Barry Gardiner: Goodness me! To put numbers into the Bill? I am afraid that the Government have already done that; they have clearly set out figures in the Bill. Whether the figures are adequate is a different question. What will 450 grams per kWh for CO2 emissions achieve except to clear out unabated coal? Is that a policy in a Bill that is supposed to achieve a lowering of our carbon emissions? The hon. Gentleman knows as well as I do that it will not. Indeed, when we were in the Energy and Climate Change Committee he signed up to the Select Committee report—it was unanimous—that specifically stated that there should be carbon intensity targets in the Bill. Now he comes into the Public Bill Committee—I understand that the Whips are looking at him now; that this is a different situation from when you have free rein to use your own intellect—and it is the hon. Gentleman himself who has signed up, saying that he wanted carbon intensity targets on the face of the Bill. And what were they? They were between and 50 and 60 grams per kWh.

Dan Byles: I am sure that the hon. Gentleman will remember my interchange with Dr Kennedy during the Bill commission, when I specifically challenged his view about targets in the Bill. Yes, in the interests of compromise and unanimity I signed up to the Select Committee report, but the hon. Member will very clearly remember my expressing my concerns about this in the Committee. I still have not had an answer from him as to what number he or his party are proposing.

Barry Gardiner: Is it not wonderful, Mr. Bayley? We have gone from a Committee to a commission, I know, but what we are talking about is last week. I cannot remember, Mr Bayley, whether you or Mr Leigh were in the Chair at that point, but the hon. Gentleman challenged Dr David Kennedy, the Chief Executive of the Committee on Climate Change, specifically about this issue.
 Dan Byles  rose—

Barry Gardiner: The hon. Gentleman does not want me to respond to his second intervention before I allow him his third.

Dan Byles: The hon. Gentleman misunderstands. I was referring to the occasion during the Select Committee hearing, when I also challenged Dr. Kennedy on the same point, asking whether he agreed that putting 50 grams on the face of the Bill was elevating emission reductions above affordability and risked saying, “Emission reductions at any cost.” I challenged him on the same points during Select Committee.

Barry Gardiner: I apologise to the hon. Gentleman. I do indeed recall. Is it not wonderful? That is what the Select Committee does—it takes evidence from people who presumably know what they are talking about, most of them, and it listens to that evidence and it weighs that evidence, and it comes to a conclusion about that evidence. Of course we challenge the evidence, and I do remember the hon. Gentleman challenging David Kennedy in the Select Committee. However, I also remember him signing up—again, it was unanimous—on that Select Committee, to a report that said that a target should be in the Bill. I assumed that the hon. Gentleman had interrogated the witness, listened to the response, been persuaded by the argument, and signed up through his own free capacity. Clearly, I was mistaken.

Dan Byles: Obviously, I wish to allow the hon. Member to continue his eloquent soliloquy, and I am delighted that we are focusing so heavily on my personal views. They say that you know you have made it in public life when you have got a stalker. I shall choose to be flattered rather than frightened by the hon. Member’s interest in my personal views. He is fully aware that as a Select Committee we take the view that unanimous reports carry more weight. He might agree 100% with everything in every one of our reports, whereas I occasionally have to compromise in order to achieve that unanimity. I am still waiting for the hon. Member to give us his alternative figures, which I presume are Labour party policy, to put in the Bill and so into primary legislation.

Barry Gardiner: Yes, certainly. It is not my business—I am not a Front-Bench spokesperson—to give the hon. Gentleman Labour party policy, but I am happy to give him my unfettered judgement on this issue, without fear of our Whip. He is a charming fellow, and I am sure that, were I to do anything to cause him distress, he would turn and glare at me and intimidate me beyond measure. However, I am happy to give the hon. Gentleman my clear and unfettered view as to what constitutes low-carbon generation. By 2030 we cannot have any higher carbon generation than 100 grams per kWh and we should have a target in the Bill of between 40 grams and 60 grams per kWh.

Robert Smith: On that narrow point about not having any higher carbon generation than 100 grams per kWh, does the hon. Gentleman not think that there will still be an occasional need at peaking capacity for plant that would have a higher emission per kWh, but would be used for so little time that its impact would be minimal?

Barry Gardiner: The hon. Gentleman is absolutely right and has corrected me; what I should have said is an average of 100 grams per kWh. He is also absolutely right that we will need peaking capacity in 2030; there is no doubt about that. What that leads one to consider, of course, is what the nature of that peaking capacity should be: whether it should be allowed to be 450 grams per kWh, as envisaged in the Bill—as he knows, that would include unabated gas—or whether there should be other provisions in the Bill, perhaps to eliminate that issue and say that we should have combined heat and power, so that there is better carbon use. As I am sure the hon. Gentleman appreciates, that would substantially reduce the emissions from the power output.

Dan Byles: Argy-bargy aside, does the hon. Gentleman believe that it will be possible to hit those intensity targets without commercially viable carbon capture and storage being available by that time?

Barry Gardiner: Yes, I believe that that is possible, but I also believe it is extremely difficult. The hon. Gentleman raises another question that is very pertinent to the Bill, because of course this Government stopped going forward with the CCS project that Europe had stated was the No. 1 project. First of all, there was £4 billion for it; then there was £1 billion, and £3 billion in reserve; then, when it came down to it, there were no billions. The hon. Gentleman’s point about CCS is really important. We need CCS. The Government gave us an excuse for not supporting that particular CCS project. They said, “Actually, what we need in the UK is not coal CCS, it is gas CCS; now that we know—the Chancellor has written it in 6 foot high letters on the sides of Westminster Hall—that we are going to go for a dash for gas, it is sensible for us to have gas CCS as part of our policy.”
The problem, as I am sure the hon. Gentleman appreciates, is that the world for the next 30 or probably 40 years is going to be powered not by gas but by coal. The major energy of the world is going to be supplied by coal, so the real question is why are we not developing the CCS technology that will be most important for climate change, most important as a technology in combating global warming, but—more importantly—most important for our own economy in the UK? That is the technology that we want to produce and export, yet this Government simply said, “Oh no, we are going to be relying on gas, because the Chancellor said so, so we will scrap the No. 1 project”—the one that Europe said was top of the list in terms of CCS for coal. It was insanity, and, again, it is an insanity that is reflected in the Bill.

Michael Weir: Does the hon. Gentleman not agree that there is an argument for both coal and gas? I recall standing here during proceedings on a previous Energy Bill, arguing against the then Labour Government’s refusal to include gas CCS. It was only with the support of colleagues who are now in government that that measure was eventually pushed through on Third Reading. Governments have, through the years, failed to invest properly in CCS. They have lost the leads that we could have had, both in gas and coal, and we are now playing catch-up—or not catch-up, as we seem to sliding backwards now.

Barry Gardiner: I absolutely agree with the hon. Gentleman. Of course we need both coal and gas. Indeed, I am sure that the hon. Gentleman will remember that, with the £4 billion allocated by the previous Government, there was supposed to be a gas CCS project piloted in exactly the way that he suggests. It is critical that we have this technology. However, it is equally clear that it is not even of second-order importance in this Government’s thinking at the moment. That is the real tragedy. Nothing in this Bill sets that right.

Ian Lavery: Does my hon. Friend agree with me that we are still burning coal in huge amounts and that the world trend will increase between now and 2050? There are only two or three underground collieries left in the country producing, together with the opencast mines, somewhere in the region of 18 million tonnes of coal. Yet we are still burning between 50 million and 60 million tonnes of coal. Would it not be right for the Government to do everything in their power to maintain—in fact, increase—the British deep-mine coal industry?

Barry Gardiner: I hesitate even to reply to my hon. Friend, because his expertise on matters of coal is way beyond mine. He has been connected with the industry in the most significant way for many years. He is right, of course, to point to the critical nature of the UK coal industry and the importance of coal in our future supply. One of the points I am sure he is alluding to here—which is central to the debate, especially in terms of security of supply—is that in this country we will face a real crisis in 2017-18, as I am sure the Minister will acknowledge. I cannot remember Ofgem’s rather elegant phrase for it, but what it means is that the lights may go off. This has been a huge driver of Government policy. However, at the same time as acknowledging that the lights may go off, we also know that the opportunity to extend base-load supply from coal-fired power stations will be radically reduced. This is because the European directive will close down the end-of-life directive, which will be closing down many of our coal-fired power stations.
My hon. Friend is absolutely right. Rather than commit ourselves to a dash for gas that, with grandfathering rights, will lock us in to high emissions levels for the next 35 to 40 years—indeed, till 2044, according to the Bill—is it not preferable that we should see a continuation of coal to tide us over the 2017-18 gap and then swiftly move away from it, as we build up capacity in these intervening years? Is that not preferable, rather than locking ourselves into what is still a high-carbon technology, namely gas, for the next 35 to 40 years—gas which is unabated, because we do not yet have the CCS in place? I speak as somebody who wants to see the lowest carbon emissions possible as soon as possible, so it is not in my nature to be arguing the case for unabated coal. These are really significant questions, which this Bill simply does not answer.
Mr Bayley, I want to address specifically the various amendments that you have selected, and in particular to pose a question about the nature of amendment 31 to my hon. Friend the Member for Rutherglen and Hamilton West. The amendment is a fairly innocuous one as it appears on the amendment paper. It simply says:
“Clause 2, page 2, line 42, after ‘section’, insert ‘3’.”
Hon. Members may think, “What can anybody find to say about that, never mind at length?” But if one looks at that clause, it is part of chapter 2, which is headed “Contracts for Difference”. Clause 2 is headed “Regulations to encourage low carbon electricity generation”. Clause 2(8) refers to
“An instrument containing regulations which make provision falling within sections 5, 6 or 7”.
Amendment 31 seeks to add section 3 to those sections. So it would read
“An instrument containing regulations which make provision falling within section 3”—
Subsection (3) says:
“For the purposes of this Chapter—
‘CFD counterparty’ is to be construed in accordance with section 3(2);
‘eligible generator’ is to be construed in accordance with section 6(3);
‘low carbon electricity generation’”—
as we already talked about, is to be construed in any way the Secretary of State likes, and—
“‘regulations’ means regulations under this section.”
I simply ask my hon. Friend about an instrument containing regulations which make provision falling within section 5, 6 or 7. I am not sure whether there are regulations falling within section 3, or whether section 3 simply defines terms that may be included in other regulations. It is a textual point, but it is of some importance to get clarity as we proceed.

Albert Owen: It is always a great pleasure to serve under you, Mr. Bayley. It is also a great pleasure to follow my hon. Friend the Member for Brent North. I begin by disagreeing with him profoundly. I do not describe the Minister in any way as Henry VIII. On the day when we are debating in the House of Commons the succession to the Crown, I have to say that the Tudor dynasty originated in my constituency, and we are proud of that lineage. In recent years, you will know, Mr. Bayley, that I have crossed the floor and gone over to the House of York, and of late have been a bigger fan of Richard III than of the Tudors. That would be digressing, and I am sure that the hon. Member for Brent North was not doing so. I do not describe the Minister as a Henry VIII figure, but he has been described by the august journal The House Magazine, as a clever boxer. He is described as boxing clever with the Energy Bill, and with the issues before us today. I am a boxing fan; the Minister has thus far been floating like a butterfly, but we have not seen many stings from him. In this Committee we will be able to draw a few blows from the Minister and find out some things.
I do not disagree with the principle of this Bill and this clause as it stands. Who could disagree with clause 1, when it talks about the main principles of the Bill, which are security of supply of energy, decarbonisation, and affordability to business as well as to the domestic consumer? Indeed, the previous Government had similar aims and moved forward with them, and this is a natural step on the way to reform. As members of this Committee who are also members of the Energy and Climate Change Committee will know, the Select Committee has made a detailed inquiry into both EMR and this Bill. So I am a little dismayed, as I said on Second Reading, by the lack of detail that has come before us at this stage, because it has hardly been a rush for the Government. They have had plenty of time to come up with greater detail. Those broad principles of the Bill in clause 1, which talks about, for instance, affordability–we are not to know until, I believe, February, the structure of the tariffs the Government intend to bring forward. Consumers and businesses that we represent need to know that detail very quickly. I am disappointed with that. However my hon. Friend the Member for Rutherglen and Hamilton West is right to table these amendments down, in many ways to pin the Government down.
Amendment 29, which is in my hon. Friend’s name and that of my hon. Friend the Member for Liverpool, Wavertree, is absolutely right, because the opportunity is now there for the Secretary of State to give an annual energy review to the House of Commons. It is very important to have that so that we know what progress has been made. I think it is sensible to add amendment 29 to the Bill, in order to report back.
Boxer Muhammad Ali said that he was the greatest who ever lived, and this Government and the other Minister say that this Government are the greenest. Well, let us have a little checklist on how this Government are making progress. The provision of amendment 29 for an annual review of decarbonisation targets and various other aspects would present a good opportunity for Parliament and the country to judge this Government. So I think the amendment placed before this Committee is very sensible.
Before the Government rush to oppose all Opposition amendments we need to have proper dialogue and debate, because at the end of the day we all want the same ends for this Bill. That is to have security of supply, a lower-carbon output and affordability for the consumer. We are in agreement on that, and I do not think that amendment in any way puts undue pressure on the Minister, the Government or the Secretary of State in calling for an annual energy report, and on top of that reporting back on the progress being made on the Bill and the intents of the Bill.
I hope that during the next few weeks we have a good dialogue and that good progress is made. I hope that we will all work together to ensure that we have security of energy supply in this country and that we have decarbonisation and proper targets, which I think most of the members of this Committee, including the hon. Member for North Warwickshire, would like to see in the Bill. The Whips will have a role in ensuring that we get through this business, but we have an individual role as Members to ensure that we get this right, that we move forward and that we use this Bill as a vehicle. The amendments will assist in taking this Bill forward in a progressive and proactive way.

John Hayes: What a great honour to be speaking on behalf of the Government, as one of Her Majesty’s Ministers, and to be taking this important Bill through the House. What a delight to be able to do so on a Committee which is filled with expertise throughout its length and breadth, and what a privilege to do so under your sagacious chairmanship, Mr Bayley.
As has already been said, the Bill is important. Perhaps a little harshly, on Second Reading I accused the Opposition of dancing on the head of a pin, and I mentioned Sid Owen and Cyd Charisse. At that time their bandwagon was skidding in the small space between opportunism and opportunity. I am relieved to hear from the tone of what has been said and the character of these amendments that they are now back on the road to common sense, a common sense personified by the shadow Minister. It is pretty impressive—I hope you will agree, Mr Bayley—to get a reference to both Bruce Forsyth and Jack Kerouac early on in this Committee’s consideration: popular culture and the beat generation. Perhaps that is the characteristic which informs this Committee.
The amendments, if I may describe them as being focused on both clarity and the provision of information, reflect that commonsensical approach, which I hope will inform our consideration as we debate the Bill line by line. The hon. Member for Brent North was right to say that the Government have been clear about their objectives. These objectives are plain; they are about energy security; delivering that energy security within the context of the commitments we have made on carbon emissions; and doing so in a way that is affordable. Those are the underpinning aims of this proposed legislation. In doing that, it is vitally important that the lines of accountability from Government to this House are maintained. In part, the amendments focus on that, and I shall deal with that in turn.
The objectives that I have described—again, there is broad agreement on this—can be met only through electricity market reform. It is about securing a clean, reliable source of energy in a way that delivers for consumers. Clause 1 clearly points out the importance of these driving factors by placing a duty on the Secretary of State to have regard to the objectives when carrying out key functions of the electricity market reform, including contracts for difference and the capacity market.
The amendments tabled on how we shall report on the delivery of EMR are pertinent to that. They raise significant points and, as the shadow Minister anticipated, I agree entirely that a review of how we meet our objectives is vital to the success of these reforms. If the Bill is genuinely going to be a Bill for the future—not just this Parliament, but a Bill that deserves a consensual approach—it needs to have those lines of accountability running through it clearly. I agree that Parliament should have the information it needs to scrutinise the delivery of EMR properly in that way. I hope to outline how the Government intend to do this in the responses that I give to the amendments.
Before I go into that in some detail, however, perhaps I could say a few words about the hon. Member for Brent North. Continuing—I am strictly speaking—this popular cultural dancing theme, he has a curious appeal, a bit like Claudia Winkleman: loquacious and odd but, none the less, rather engaging. I have enjoyed his contributions this morning, as I always enjoy his contributions to debates, and he speaks with some authority on these matters.
The hon. Gentleman compared me to Henry VIII, who was the defender of the faith. There is a misconception about that: people assume that he became defender of the faith after the foundation of the Church of England, but he was granted that title by the Pope because of the view that he took about Luther, so he became defender of the faith before the establishment of the Church of England. I do not claim anything so grand; I merely claim the mantle of defending the flame of conservatism in this House and in this Coalition; nothing more than that.

Barry Gardiner: The Minister is absolutely right that Henry VIII was granted that title for his defence of the Roman Catholic faith, but I simply remind the Minister that he did not carry out that function terribly well.

John Hayes: Well, he had many qualities, but even your indulgence, Mr Bayley, would not allow us to explore them at immense length.

Hugh Bayley: So far I have been enjoying this small detour.

John Hayes: There are worse people to be compared with than that great sovereign, so I take the hon. Gentleman’s point in the spirit that it was offered, as yet another compliment.
The hon. Gentleman claimed—with style, I have to say—that the Bill was both too permissive and too particular. He said that it was too permissive in that it was not specific enough on the detail of the Government’s objectives, and yet it was too narrow and particular in that it did not deal with the whole economy. He did that elegantly, but unpersuasively. He is right that the Bill needs to be sufficiently broad to take into account the effects of energy policy on the whole economy, but what could be more fundamental to the economy than energy security? Delivering energy security is not merely about well-being. Of course, it is about well-being—all of our futures, indeed—but it is also about the underpinning certainty that allows for economic growth, which encourages investment across the whole economy. That is why the CBI has given the Bill such a warm welcome. This is a Bill that has been long-awaited by all parts of the economy for the very clarity that it provides, which the hon. Gentleman claims is so vital.

Barry Gardiner: The Minister is absolutely right to say that the Bill has been long awaited, and I join those who say we need the Bill to go forward. However, we need a better Bill. The Minister said the Bill needs to generate confidence in the whole economy and particularly to incentivise supply chains, but we will come later to the point at which it significantly fails to do that. We should be encouraging supply chains in the renewables industry, but it is precisely the Bill’s failure to incorporate the targets mentioned earlier that means that it fails to connect with the wider British economy, and that is its chief failure.

John Hayes: I will come to the point about targets in a moment. I am grateful for the hon. Gentleman’s general acknowledgement of the significance of a Bill, as he puts it. He will agree that, in essence, the reforms embedded in the Bill are necessary to facilitate the investment that is essential to guarantee energy security.
To illustrate the point I made a moment ago, the CBI’s exact words were:
“we are actually very pleased with the Bill…the Government and Parliament have listened to industry in moving from the White Paper to the draft Bill that we saw last year and the Bill that is before Parliament now.”––[Official Report, Energy Public Bill Committee, 15 January 2013; c. 46, Q140.]
It was not just the CBI that welcomed the Bill. Other witnesses the Committee heard from in the first part of its consideration just last week made it clear that they, too, welcomed it. Professor Catherine Mitchell of Exeter university said:
“We are moving in the right direction.”––[Official Report, Energy Public Bill Committee, 15 January 2013; c. 75, Q223.]
Dr David Kennedy, from the Committee on Climate Change said:
“The fundamental aspect of the Bill is the introduction of long-term contracts that provide revenue certainty to investors who have to put in very large amounts of money”.––[Official Report, Energy Public Bill Committee, 17 January 2013; c. 92, Q262.]
A recognition of the additional certainty and clarity the Bill will bring seemed to characterise much of the evidence that we heard last week.

Michael Weir: I understand, and agree with much of, what the Minister says about the welcome for the Bill, but the fundamental difficulty is that, all of us might welcome its principles and the direction of travel, there is still a lack of detail, as other Members have said, and that is what has caused many of the amendments to be tabled. If we had that detail and the secondary legislation before us, many of the amendments might go away, and we would move forward more easily. However, as things stand, and without seeing the full detail, it is difficult to know how everything will work.

John Hayes: That is the case that has been put by the Opposition, and, it seems to me, not unreasonably. As I said right at the outset, the amendments focus on the desire for information to be provided to the House and elsewhere.
 Tom Greatrex  rose—

John Hayes: I will deal with the amendments on their particular terms and say a word about the Government’s perspective once the shadow Minister has, no doubt, articulated that case.

Tom Greatrex: I do not want to start this first morning sitting of our detailed consideration of the Bill by trading quotes from the evidence session. The Minister will accept that although there was a broad recognition among those giving evidence that the Bill represented progress over the draft Bill, there was considerable concern about some of the detail that was still unavailable. These amendments and others we will come on to discuss are designed to tease out precisely those issues of concern, in the absence of any draft secondary legislation that we can, as the hon. Member for Angus said, look at to ensure that we can all be satisfied with the move from the Bill’s broad objectives to its implementation.

John Hayes: Let me turn first to amendment 29, in the spirit in which the hon. Gentleman has just made his case. The amendment would require the Secretary of State to lay a report before Parliament on how the EMR functions meet the objectives. The Government have set out their commitment to review regulation at clause 46. As the hon. Gentleman will know, that clause places a duty on the Secretary of State to carry out a review of the provisions set out in part 1 of the Bill five years after Royal Assent, and to report the conclusions to Parliament.
The hon. Gentleman makes the case that that review should be more frequent. I think he will acknowledge that the report that the Secretary of State is required to lay before Parliament must, first, set out the objectives of the provisions in each chapter; secondly, assess the extent to which those objectives have been achieved, and, thirdly, assess whether those objectives are still appropriate and, if so, whether they could be achieved with less regulation. That is a pretty thorough review of the effect of the changes.
There is a case around frequency but we take the view that five years will give an opportunity for some of the principal effects of the Bill to take shape. We are talking about investment decisions taking place over a considerable time. It seems appropriate that we look retrospectively at the effects of the Bill along the lines that I have set out, so that a Government at that point can make judgments and decisions about how far we have travelled towards the desired destination and what more might be done.

Luciana Berger: I listened carefully to the Minister’s reasons for the five-year reporting period. However, I draw his attention to the debate about reporting that we had during the passage of the Energy Bill in 2011. I accept that the green deal is distinct from the scheme and electricity market reform that we are discussing today. However, we had a very similar discussion then about whether it was necessary to report on an annual basis. We proposed amendments to that Bill stating that we would like to see Government report on an annual basis and reasons were given why not.
The Minister may be aware that yesterday the draft Green Deal Framework (Disclosure, Acknowledgment, Redress etc.) (Amendment) Regulations 2013, the secondary legislation on the green deal, was debated, under which the Government now agree to make an annual report to Parliament on the progress of the green deal. I ask the Minister, in the spirit of this morning’s discussion, to reconsider what he has just said. Given that this will cost consumers on their bills, people will want to see reports from Parliament on progress, and five years is a long time to wait.

John Hayes: Yes, I have sat on many Bill Committees over many years, sadly too frequently as the shadow Minister. As a shadow Minister I would have made a similar argument, because that is what Oppositions, rightly, do. It is good for the health of Parliament that they can, and legislation is improved when they do. It is absolutely right for the Opposition to put this case. However, I remind the hon. Lady that the annual energy statement will include a report on EMR, so there is already an annual statement with which she is familiar.
I will ensure that EMR is included in that. That will go a long way towards meeting the objectives of the amendment. Because of the strategic character of the reform of the electricity market, to expect to see this in the round after a single year is probably a triumph of hope over reason. Yes, we should look at the immediate effect but we should certainly look at these things thoroughly in a period that matches the changes to strategic significance. That will give us a chance to draw together sufficient data to assess how EMR has been working in practice rather than in theory.
I hear what is said, but the combination of inclusion in the annual energy statement of a reflection on EMR and the five-year report makes a robust mechanism for Government, Opposition and the whole House to consider the effect of the changes.

Barry Gardiner: The Minister has made a case for a five-year reporting basis. He referred to clause 46, which calls for the review of five separate chapters—2, 3, 4, 6 and 7. Unfortunately, it does not include the provisions under chapter 8, “Emissions performance standard”, for review in the same way. Does the Minister agree that that would be a sensible inclusion at that point, or is he minded to support another amendment, which would introduce such a provision under chapter 8? Otherwise, under the terms of the Bill as it currently stands, those exceptionally important provisions in the EPS will go unreviewed, even on a five-yearly basis, and I am sure that the Minister does not wish that.

John Hayes: For the sake of clarity, the provision to which the hon. Gentleman referred makes it clear that the five-year review will include consideration of contracts for difference, the capacity market, conflicts of interest and contingency arrangements, access to markets, the renewables obligation and transitional arrangements. It says:
“The Secretary of State must set out the conclusions of the review in a report. The report must, in particular…set out the objectives of the provisions of each Chapter subject to review…assess the extent to which those objectives have been achieved”.
The hon. Gentleman is right, and I will reflect on his point. As he will understand, I do not want to commit now, but I am not unsympathetic to the general thrust of the Opposition’s line of inquiry—to put it as gently as possible—which is that the House should be fully informed about progress. Indeed, that is good government. The Government need to reflect on the effects of what they do and, through that reflection, improve government. I am not unsympathetic to the spirit that underpins the amendments, or to the arguments for greater clarity that we have heard from the hon. Member for Brent North, the shadow Minister, and the hon. Member for Ynys Môn.
I am grateful to hon. Members for moving amendment 30. It suggests that CFD regulations include a statement containing detail on how the impact on greenhouse gas emissions, customer bills and security of supply has been taken into consideration. As I said, this is about greater clarity.
As I mentioned earlier, the Secretary of State will already have regard to the impact on greenhouse gas emissions, consumer bills and energy security in setting CFD regulations, as is required under clause 1. Furthermore, the intention is to consult on this detail, and when the regulations are laid before Parliament next year, they will be subject to the affirmative resolution procedure. As such, there is opportunity for interested parties and Parliament to scrutinise the effect of the regulations.
It would be difficult to isolate the impact of CFD regulations on the specified factors and report on precisely how they will affect each eligible technology. The expected impact on consumer bills of the CFD scheme as a whole will be set out in the EMR delivery plan. I am anxious that as much draft information as possible is provided. The shadow Minister raised the matter at the start of his remarks. He will know that just before the Christmas recess we published an operational framework for CFDs, a heads of terms for CFDs and an update on the capacity market. We will be publishing a draft delivery plan in the summer, setting out detail on, for instance, the CFD strike prices. I am also keen that we look closely at the capacity market mechanism. I may be anticipating what might be said during the course of our scrutiny. I do not want to do that to an excessive degree, because it would steal the Opposition’s thunder—shoot their fox—and I would not want to do that, as they know. However, I anticipate that some will argue that we need to be more specific about the design. I want to return to that during our consideration, but I am not unsympathetic to the general tenor of the Opposition’s views on these matters.
It is more effective, however, to consider security of electricity supply at macro level—in other words, across the full range of technologies, rather than in relation to individual specific technologies—because security of supply is, by its nature, the result of an amalgam of effects from different generating sources and it should be considered in that strategic way. I hope that the combination of what I have said and suggested I might say will be sufficient to persuade hon. Members of my views and intentions as we proceed.
On amendments 31, 37, 38 and 39, I want to stress some points to the shadow Minister, in particular to reassure him and other hon. Members that there can be only two parties to a CFD: the generator and the CFD counterparty. He has expressed concern about that previously. The Government’s intention is that there is only CFD counterparty, which will be a Government-owned company. We have duties under the Bill to ensure that the counterparty is able to fund CFD payments. We want it to be a robust and healthy institution, which endures throughout the many years that we expect CFDs to run for.
Turning to the amendments themselves, we must have the ability to deal swiftly and appropriately with the unexpected, with minimal impact on generator confidence. In the unlikely event that a CFD counterparty withdrew its consent to be the counterparty, or the Secretary of State revoked designation, it would be vital to have the ability for swift designation of a new body and transfer of property, rights and liabilities to ensure the continuity of any payments to generators, and to avoid the investment hiatus that could be created if there were either no counterparty, or an ineffective counterparty. The Department will wish to take action more quickly than the amendments would allow. In essence, the argument is about whether the need for that alacrity, which might be inhibited by the amendments, is sufficient to resist the amendments. We have decided that it is, although I understand the sentiment and the intent of the amendments, and I am not unsympathetic to them.
To give practical effect to the transfer of functions should a new counterparty be designated, it is critically important that we have at our disposal the powers to move swiftly. Schedule 1 confers on the Secretary of State a power to transfer property, rights and liabilities in connection with a transfer of the functions and to pay compensation where necessary. Transfer schemes are technical and often contain information that is commercially sensitive, confidential or personal. Parliamentary approval for such a technical function is not usual or appropriate, and would further increase delay in giving practical effect to a new CFD counterparty. It is not possible to know at this stage what property rights and liabilities may need to be transferred in those terms and therefore in what circumstances compensation may need to be paid, but it is possible to envisage situations where, for instance, the original counterparty is compensated for the use of its IT systems or property, if these had been swiftly transferred to allow the continuation of the counterparty services. Funding for such compensation can only come from one source under the arrangements in the Bill—the Secretary of State.
The transfer scheme is not intended to compensate generators, whose arrangements for CFD payments are dealt with under the CFD contract. Since it is a requirement on transfer that all rights and liabilities in CFDs must be transferred after a counterparty has its designation removed, there should be nothing that generators would require compensation for. This technical and commercial function should not require parliamentary approval, which in turn could complicate and delay the ability to put in place an effective and fully functioning new counterparty.
I stress that failure to provide continuity of CFD counterparties would undermine investor and developer trust in CFDs. Developers and investors are likely to see the need for parliamentary approval as increasing the risk that a new CFD counterparty will not be in place in a timely manner. This is about dealing with these matters with appropriate alacrity and efficiency. There is an unintended risk that the amendments might create a delay that would inhibit that efficiency and the confidence which springs from it. I hope that Members find my explanation of why we will resist the amendment persuasive, or at the very least, reassuring.
Amendment 40 would require the Secretary of State to lay an annual review of the impact to customer bills through the contracts for difference, and for the CFD regulations to include provision for issuing exemptions for energy intensive industries from costs of the supplier obligations in clause 5. My Department regularly assesses the impact of policies on Bills, and we are committed to updating and publishing them annually alongside the annual energy statement. I am conscious that this, again, is an understandable line of argument. It is important that the effect on consumers is measured. As I said at the outset, affordability is one of the fundamental aims of the Bill, therefore not to gauge its effect on affordability would not be acceptable, which is precisely why we have agreed to do what I just described. The report on the effects of EMR, including any impacts in regard to the supplier obligation, will be an important means by which we can assess the effect of the Bill on consumers.
We are currently developing the exemption for energy intensive industries—as you know, Mr Bailey—and the Opposition are well aware of this particular aspect of our considerations. The Department is working with the Department of Business, Innovation and Skills to scope out the detail. It is a sensitive matter, but one over which I am sure we can come to a sensible agreement. I do not think the duty proposed in the amendment is necessary, and indeed it would have to be subsequently removed should the Government not receive state aid clearance. For this reason I hope that hon. Members will be content to withdraw the amendment.
Turning to amendment 50, again I am grateful to hon. Members for raising this matter, which suggests laying before Parliament any information and advice provided to the Secretary of State under clause 9. Hon. Members may wish to note that there is already provision under subsection (1) of clause 9 to publish information where it is appropriate. Where necessary, the Secretary of State must be able to retain the right to treat the information provided confidentially, for example when it is commercially sensitive. We have made it clear that we will publish as much information as we reasonably can about what will, by their nature, be commercial matters. The shadow Minister and other members of the Committee will understand that there is a line to be drawn between making available as much information that assures the House and the wider public that what has been done was done entirely properly and reasonably, and on the other hand, crossing that line and making information available that would deter investors, because the information would be commercially valuable to their competitors.

Barry Gardiner: The Minister has touched on an exceptionally important matter, relating to the transparency of information that will be available not simply to this Committee, but to Parliament and the wider public. He will appreciate that in the whole basis of CFDs and the negotiations around the strike price, it is absolutely vital to get as much transparency as possible. I think the Minister was present last week at the evidence hearing where even Vincent de Rivaz, the chief executive of EDF Energy, made precisely those points, despite the fact that he was obviously unwilling to go into the predictors of the negotiation going on with the Government at the moment. Will the Minister address himself to those parts of schedule 3—sub-paragraphs (3)(c) and (d) of paragraph 3 on page 101—where wide powers are given to the Secretary of State simply to rule that something should not be revealed? Would the Minister be open to an amendment being tabled, or would the Government table such an amendment, to do it in the way it is done in sub-paragraph (3)(a), which states:
“This sub-paragraph applies to information if it is—not the strike price or the reference price;”?
That seems an eminently sensible way of specifying rather than using, as in sub-paragraphs (c) and (d), words such as
“information the disclosure of which, in the opinion of the Secretary of State at that time, would or would be likely to prejudice the commercial interests”.
Would he use a double negative provision as in sub-paragraph (a) to talk about “not information that relates to liabilities or risks that would be placed on energy consumers or on the public balance sheet”? That would be a way of specifying what the public absolutely needs to know. It does not go any further, and of course it enables proper commercial sensitivities to be respected. This is a serious point which the Minister really must address.

John Hayes: As the hon. Gentleman rightly said, this is a challenging area and would be for any Government. This is not a party political matter. I am mindful of what Vincent de Rivaz made clear at the end of the session. He said:
“I am in favour of transparency for us and for all.”––[Official Report, Energy Public Bill Committee, 17 January 2013; c. 124, Q357.]
That transparency, which I also made clear the Government are enthusiastic about, must be such that it engenders the House’s confidence, and public confidence, that a decision that has been made through negotiation on price has been made with the best endeavours on the basis of all the necessary information and in the public interest. Those seem to be fundamentals. I think the sector would want me to make the case that we will be treading a line and that, on the side of the line where information is so commercially sensitive that it might compromise an investor and have value to a competitor, it might discourage people from engaging in the negotiation at all. I do not think any Member would want us to be on that side of the line, so this is about striking a balance in those terms.
Let me take the opportunity to talk about some of the things we can do to strike that balance. The hon. Gentleman mentioned EDF, so let me talk a little about the negotiation around Hinkley Point and how that might be used as an example of treading that line. We have put into place a number of processes to ensure that any investment contract agreed for Hinkley Point C is the best possible deal for consumers, represents value for money and is subject to appropriate scrutiny. That includes commissioning expert technical and financial advisers to provide reports for the Secretary of State on the detailed cost of the project and the likely returns to the developer through “open book” scrutiny of the developer’s plans and documentation. Secondly, it involves appraising the value for money of any contract, drawing on those reports, through a fair price assessment, to consider whether the returns to the developer and levels of risk-sharing are appropriate, through a comparator assessment, which assesses the costs of the project against other low-carbon technologies on a comparable basis, and through an affordability assessment of the expected impact on consumers’ bills—very much along the lines that we were speaking about a few moments ago. But it also involves commissioning a fairness opinion from financial advisers, assessing whether any proposed contract represents fair value to all parties.
I have made it clear that a summary of those reports, and the value-for-money appraisals, will be published alongside any contract agreed and will therefore be open to scrutiny. By using the process by which we assess those things as independently as possible, we make strides towards the kind of empiricism that is desirable and is implicit in the hon. Gentleman’s call for transparency.
The issue here is what would be proportionate. It would not be proportionate to require all information and advice given to the Secretary of State to be published. The relevant section of National Grid’s analysis and the work of the panel of technical experts—for example, relating to the delivery plan analysis—will be published, as I said, as part of the EMR delivery plan. Although it is not for me to say, I suspect that there is considerable good will across the Committee towards walking the line I have described. The proper debate is about how we define the circumstances in which we walk that line.

Barry Gardiner: I assure the Minister that there really is good will on this issue. In the spirit of that good will, instead of a Henry VIII clause we need a clear definition of what must be revealed—that could be fairly narrowly conscribed. He has set out what he proposes, but of course it is open to any future Secretary of State, or indeed the current one, to have a different view at a different time from what is proposed. What would give Parliament and the public maximum assurance that such things are being properly scrutinised would be to define clearly those elements that are in the public interest and so must be transparent and available. I am sure that, through the normal channels, it will be possible to work up an amendment that either the Opposition or the Government can table, which has that consensual nature behind it and will achieve the objective that I am sure the Minister and I both have on this issue.

John Hayes: As the scrutiny gathers pace, I am increasingly beginning to think that I may come to regard the hon. Gentleman as my Cardinal Wolsey, although Wolsey’s fate is not something that he would want to enjoy. He is right about the need for clarity of information on this issue. The purpose of the Committee is for us to reflect on such matters carefully in the discussions we have. I would just remind him that, in terms of specific transparency on investment contracts, the Bill says that we must lay investment contracts, as I think he mentioned, and the powers in the Bill in relation to them before Parliament. Investment contracts must be published, as he knows. The contract that is laid before Parliament and published must include details of the strike price and the reference price. It may exclude information the disclosure of which would damage commercial interests, as I described earlier, but it is expected that that exclusion would apply only—and this is the point I have just made—to a very limited amount of information, for example relating to commercially sensitive aspects of the developer’s financial models.
The essence of this issue is that we want to elicit as much information as we can from the developer about their financial circumstances and the modelling they have used, on which their negotiating position is based. To get that information, however, they have to be sure that its publication would not, as I described earlier, compromise them competitively. The retention of this small amount of latitude in what we do not publish—what we will publish is of course the essence of the deal—has to be sufficient to allow us to get the best possible deal. This is an interesting debate about an interesting aspect of this work, but I suspect that any Government or Minister, whoever they were, would want that small amount of discretion.
The hon. Member for Rutherglen and Hamilton West put his case in an extremely measured way. I hope that I have set out not only what we will do but also my own sentiments. The matter is of course something that we will continue to look at and consider on the basis of not only the experience of the negotiations that we are currently engaged in, which will inform how we proceed, but also the consideration of the Committee.
I will move on, because, although we could continue this useful debate, we must make progress. I can see the Whip, my hon. Friend the Member for Orpington, nodding in agreement.
On the suggestion in amendment 51 to include a
“provision requiring any new functions conferred on the Authority to be”
approved by Parliament, I can confirm that any such functions will be exercised by regulations, which will be subject to the negative resolution procedure. That strikes the right balance between giving Parliament the opportunity of scrutiny while recognising that the powers requested cover a comparatively minor aspect of the scheme. I hope that hon. Members are satisfied by that.
In respect of amendment 52, for which I am grateful, I want to reassure the shadow Ministers that the purpose of the regulation in clause 11 is to set out transparently the points at which the Secretary of State may interact with the CFD counterparty. Regulations under clause 11 do not give the Secretary of State the power to vary or terminate any CFDs. The terms of the contract are set out in advance and are signed up to willingly by the generator. However, there could be a number of cases within the management of a contract where we would want the Secretary of State consulted before certain steps were taken. For instance, the contract will set out the circumstances that would lead to its termination if the generator did not meet certain milestones. Should such a situation arise, we may want to provide in regulation that the CFD counterparty consult the Secretary of State before exercising the right to terminate the contract.
Conversely, as the two parties to a commercial contract, the CFD counterparty and the generator could agree between themselves to vary the terms of a contract. Given that any variation could have consequences for the supplier obligation, consumer bills and the levy control framework, we may want to use the regulations to prevent the counterparty from being able to make fundamental changes to the terms of the CFD. It is to all parties’ benefit that arrangements such as these should be set out transparently in advance. Any regulations made in relation to clause 1 would be subject to parliamentary scrutiny. I therefore assert that amendment 52 is not necessary.
Finally, amendment 60 suggests laying before Parliament each year a report containing the Secretary of State’s or authority’s decision on the amount of capacity to contract for in the capacity market. I am fully committed to the principle of transparency in setting the amount of capacity. I mentioned earlier that arguably more important that that, but certainly as important, is the design of the capacity market. That is a matter to which we will refer later, but I mention it to illustrate my commitment to being as open about this as we possibly can. The decision on the amount of capacity to contract for is of interest to the public and is valuable to capacity providers, and it is right that this should be published. The intention is to publish the decision annually, most likely in updates to the EMR delivery plan. It is unlikely therefore that laying the report before Parliament will provide anything above and beyond that. I emphasise, however, that it is important that we publish the decision annually, particularly in regard to the capacity market, because that process is dynamic in character and it is important that we are all able to examine closely the effects of that arrangement. I hope that hon. Members agree that an annual report on capacity will provide enough transparency for review.
I would like to thank hon. Members once more for tabling their amendments. They are raised very much in the spirit that I set out at the outset, of constructive scrutiny, and I hope that, based on that information, which I trust has been clear and satisfactory, they will not insist on the amendments.

Tom Greatrex: I am grateful to the Minister both for providing a comprehensive response to the amendments and the issues raised during the discussion, and for recognising the spirit in which they are offered. In respect of amendment 29 I am grateful for his clarification in relation to the content of the annual energy statement, including the effect on EMR, which helps to get us some way towards the intent of the amendment. I hope he has reflected on the very good point made by my hon. Friend for Liverpool Wavertree about the timing and frequency of updates. I can accept and understand that there may be a desire to enable things to bed in before reporting them, but perhaps thereafter, or during that process, given what the Government have already accepted in relation to the green deal, it may be more appropriate for updates to be slightly more frequent than currently envisaged in the Bill. I hope he will bear that in mind.
In response to some of the issues, he quite rightly drew the Committee’s attention to the balancing act there needs to be between providing information and not hindering the Government’s ability to tweak and respond to unforeseen events. I draw his attention to the fact that by my reckoning there are 37 occurrences in this Bill where considerable latitude is given to the Secretary of State, and there is an absence of detail in some of the secondary legislation. We do not seek to make it impossible for the Government to do their job in this policy area, because we broadly accept that this Bill, hopefully, when it becomes law, will have an impact over generations and therefore over the anticipated length of any particular Government. It is therefore in the national interest to get it right. But with that level of detail currently unavailable to the Committee, it is important we ensure that information is provided to Parliament, and sometimes the affirmative and negative resolution procedures which the Minister referred to do not give quite the same opportunity as we have here.
In relation to amendments 37, 38 and 39 concerning the single counterparty, I recognise the points the Minister made. It is not our intention to put anything into the Bill which makes it more difficult than it should be. There is broad acceptance that the move to a single counterparty was a good response to the very appropriate points raised by the Select Committee in its pre-legislative scrutiny. However, he will have heard, as will others, during the evidence sessions, that there was still concern about the preciseness of that, and the risk that it might change, so I am grateful for his clarification on the policy intent and the need to have a small degree of flexibility in terms of changing from one to the other, and also on the fact that there would always be a single counterparty, and only one counterparty, which is important.

John Hayes: In respect of those witnesses who once again raised that point, I am happy to write to them making clear to them what I have made clear to this Committee, because not everyone follows these things in detail. I hope that will help.

Tom Greatrex: I am grateful to the Minister: that would be a sensible idea and I hope he is able to do so, because he will have heard the same expressions of concern that we all heard. My hon. Friend the Member for Brent North diverted somewhat into an issue that we may come back to in greater detail in relation to schedule 3, and I congratulate my hon. Friends the Members for Hyndburn and for Brent North on their line of questioning to the chief executive of EDF, which drew a more instinctive response to transparency than we have heard from that individual in the past. I make the point to the Minister that transparency is important, though we understand where that can brush up against commercial confidentiality. The right level of transparency leads to public confidence, which is vital in taking these measures forward.
On amendments 30 and 40, I was less convinced by the Minister’s responses, particularly in relation to the desire for a statement from the Secretary of State to set out his opinion on how the regulations in each case will contribute to those areas. The Minister referred to energy security being an amalgam of individual, different, specific CFDs, or energy supply. He is absolutely correct about that. However, security of supply through that amalgam comes through different individual elements. That is precisely why we think it important in this area that we have that information and assessment for each CFD. In fact, to have an opinion from the Secretary of State is not a particularly onerous task for Departments. It would help to provide some of that reassurance and clarity that we want to see throughout the Bill.
While I am content, following the reassurances from the Minister, to beg leave to withdraw the lead amendment, I intend to divide the Committee on amendments 30 and 40.

John Hayes: In a last-ditch attempt to save the hon. Gentleman from himself, I should tell him that we have published a call for evidence on small suppliers and how we can move forward in a way to create a context in which they can operate effectively. I have asked my officials but do not yet have an answer—inspiration may wing its way to me any second—what the time scale is for that and when the response to it might be published. That might help further inform the consideration of the Bill during its passage.
The hon. Gentleman needs to be absolutely sure that my fellow Minister, my right hon. Friend the Member for Bexhill and Battle, and I and the whole of our Department take the role of small suppliers very seriously. We have heard the argument made by the hon. Gentleman and others about the need for greater liquidity but also greater plurality. To create a plural system, of course, small suppliers must play their part. That was a last-ditch attempt, but I do not want to labour the point.

Tom Greatrex: I am not sure whether the Minister has yet been inspired, or is about to be, about the timing, which may be helpful. I will allow him to intervene on me if he is struck by inspiration. If he is not—

John Hayes: I may have inspiration on a parallel matter. Far be it from me to doubt the source of my inspiration. I am told that we intend to publish our approach to the supplier obligation imminently, in spring 2013. Although it might not seem so, as we look at the cold conditions, spring is on its way. That will be well within the passage of the legislation. We will be saying more on the subject that he has raised. Maybe that is enough to deter him, or he might want to give this a run; I do not know. An early Division in Committee is something I always seek to avoid, because I always seek to avoid contumely and I am trying to be as helpful as I can.

Tom Greatrex: I am conscious that the Minister has a number of flashes of inspiration. While he may look out of the window and think we are not that far from spring, I recall from the time I worked in government that spring could sometimes extend until August or September. In that regard, I am afraid I do not necessarily have the same confidence he has that we may have an opportunity to come back to these issues at a later stage of this Bill. Obviously, we certainly will not do so, given that I doubt he will expect spring to have sprung before 12 February, during the Committee stage so I still wish to put amendments 30 and 40 to the vote.

Hugh Bayley: Let me explain to the Committee. We will first have to consider whether amendment 29, the lead amendment, be withdrawn. If that is the Committee’s decision, I would be minded to have a stand part debate, because there are possibly some further matters—particularly those matters referred to under clause 1(2)—which some Members may want to discuss. Once we have considered the stand-part issue, we will come to clause 2 of the Bill, when amendment 30 will be put to the vote. So the first question I put is whether the Committee agrees that amendment 29 be withdrawn.

Tom Greatrex: I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 1 ordered to stand part of the Bill.

Amendment proposed: 30, in clause2,page2,line29,at end insert—
‘( ) Regulations must include a statement by the Secretary of State setting out his opinion as to how the Regulations will—
(a) contribute to the reduction in emissions of greenhouse gases for each low carbon form of generation to which the Regulations apply;
(b) impact on consumer bills for each low carbon form of generation to which the Regulations apply;
(c) contribute to energy security for each low carbon form of generation to which the Regulations apply.’.—(Tom Greatrex.)

Question put, That the amendment be made.

The Committee divided: Ayes 9, Noes 12.

Question accordingly negatived.

Clause 2  - Regulations to encourage low carbon electricity generation

Michael Weir: I beg to move amendment 10, in clause2, page2,line39,at end insert—
‘(e) make provision for Renewable Obligation Certificates (ROCs) to continue to be available to new and existing developments until such time as the Secretary of State and relevant devolved administrations are agreed that the Contracts for Difference, established by Chapter 2 of this Act, are established and operating to a level acceptable to both government and developers.’.

Hugh Bayley: With this it will be convenient to discuss the following:
Amendment 70, in clause37,page23,line33,at end insert—
‘(p) provision made by virtue of subsection (2)(j) must be in place for 36 months after regulations by virtue of section 2 are enacted.’.
Amendment 71, in clause37,page27,line20,at end insert—
‘(c) regulations by virtue of this section must set out the circumstances in which the Secretary of State may revoke the designation by virtue of subsection (4).’.

Michael Weir: Thank you. It is a pleasure to appear under your chairmanship again this morning. In summing up the previous debate, the Minister said that this Bill was a long time coming. He is correct in that, and it is a pity that there was not more detail in it when it arrived. This amendment—like many of mine—seeks to tease out some of the detail that I think is necessary. It may be that the delivery plan that we talked of in the summer will answer many of these questions, but by that time the Bill will have long gone from this House. Our only chance to look at these things may be in secondary legislation.
The basic point of this amendment is to raise concerns about the time scale for the closure of the current renewables obligation system, and the implementation of the contracts for difference. Concerns over this matter were raised by many of those submitting written evidence. For example, in its briefing for Second Reading, SSE stated:
“Since its introduction in 2002, the RO has been a successful mechanism to support investment. However, renewables developers do not have certainty over how the CfD will work in practice when…the RO is due to close to new projects”—
which are expected to begin generating—
“after March 2017. This uncertainty has started to result in an investment freeze for projects which are not certain to commission by that date; this will exacerbate in 2013 as more projects reach the stage at which significant development investment is needed.”
SSE supported the idea that that the two systems run concurrently, which would give those projects seeking final investment decisions in the middle of the decade certainty over future returns and would allow investment to continue. It also made the point that that would allow the renewables supply chain to have confidence to invest in manufacturing facilities in the UK, creating jobs and growth while driving down the cost of renewables; a point also made by other witnesses.
SSE also made the point that this would not mean that the mechanism was extended past 2037, but that projects that opt for the renewables obligation receive less than 20 years’ support. That matter was also raised by many of the witnesses who gave oral evidence.
It is fair to say that the response from those who gave oral evidence as to whether there might a difficulty was, in the immortal words of Kenny Dalglish, “Maybes aye, maybes no.” SSE were again clear on this issue. It said:
“It is critical that the transition from the current market is appropriately managed to prevent a continued investment freeze in the development of renewable and gas generation. In order to take forward renewables projects, developers need a robust, visible support mechanism which enables them to develop projects and obtain finance. Given the extent of uncertainty at present about how the CfD will operate, SSE recommends that the option to extend the RO 2020 is introduced and that this is made clear in policy and not precluded by the legislation.”
Again, it is the uncertainty and lack of detail that causes the problem.
Keith Anderson, who gave oral evidence on behalf of ScottishPower, voiced similar concerns. He was enthusiastic about contracts for difference, but said in effect that it very much depended on whether everything was up and running in the time scale envisaged by the Government. Referring to draft strike prices, he said:
“If we do not see them until after the summer, we will start to get worried, because we will start to think that there will be a delay to the final strike prices.”––[Official Report, Energy Public Bill Committee, 15 January 2013; c. 21, Q55.]
It is not just the energy companies that have expressed concerns but also the investors who, after all, provide the finance. It is fair to add that, in response to questions from the hon. Member for Rutherglen and Hamilton West, all the investors said that it was the length of time rather than the specific date that gave them a problem, although that does not alter the argument particularly.
In response to my question on timing, Andrew Buglass of the Low Carbon Finance Group confirmed his concerns about the limited time that was available. Hon. Members may look at his answers in more detail in columns 48 and 49 of the record of evidence, so I will not repeat them at length.
The witness from Ecotricity raised concerns about the levels of risk around gaining planning permission and grid connection, and the particular problems that they posed to small generators who might not have the financial muscle to carry these costs. That difficulty may be solved by the information and details that will become available but, yet again, the current lack of those details is clearly worrying some producers and investors. My main difficulty, however, is, as with so much of the Bill, the lack of clarity. It has been widely accepted that the date on which the Government intend to close the current ROC scheme is 2017, though that is not stated in the Bill. Presumably, it will be dealt with in secondary legislation. When I specifically asked the Secretary of State in the witness session,
“Is there scope for moving that date if there continue to be concerns or difficulties with CFDs?”
He replied, “No.” He went on to say:
“We want to close the ROC scheme in 2017. While we will run the CFD scheme parallel with the ROC scheme in 2017, after 2017, it will only be CFDs for investment in low carbon. It is very important that that certainty is there.”––[Official Report, Energy Public Bill Committee, 15 January 2013; c. 9, Q14.]
It seems to me that such a definite date for closure, without the details being known, causes uncertainty, rather than giving the certainty that Ministers and all of us want to have.
So if the CFD scheme is up and running in time—if there are no problems—perhaps there is no problem here. However, we simply do not know.

Robert Smith: Does the hon. Member accept that, from the point of view of the consumer, the CFD offers a better balance of risk than a ROC?

Michael Weir: It is a good question. I am not sure that it does, but again, we do not have the correct details. The strike price will be the crucial point in whether CFDs offer that confidence to consumers as well as to investors. They need to know how the strike price is set and that it is fair—and there may be arguments about that. Before we have those data, it is impossible to come to that conclusion. The CFD will give a long-term price, both for the generator and presumably for the consumer, but it is how they are set that will be the crucial point. I would like to see more detail about that.
As I was saying, if everything goes to plan, if we have agreed strike prices by the end of the year, it is possible that all will be well. However, as the hon. Member for Rutherglen and Hamilton West said, when he was working in government, spring could go on until the autumn, or there could be an autumn statement in December. The seasons do not seem to matter much in this place. What will happen if it does not go right, if the mechanism is not up and running and if investors in the company are not comfortable with the CFD scheme? There could well be a serious question moving forward with the confidence of investors in generators.
I am concerned that not enough thought is being given to what happens if there is such a delay. What will happen if we find that things are not going to plan, and there is nothing in the Bill that would allow a deviation from the plan? We could well end up with a hiatus in the development of low-carbon energy. That would be a disaster, both for energy policy and for meeting our carbon reduction targets.
Members will be aware that, at present, the Scottish Government operates the ROC scheme in Scotland. It differs in some respects from that which operates in England. I would not seek to overstate the differences, since both Governments have been keen to ensure that the GB-wide energy market works effectively. However, there is a different rate of ROCs for hydro in Scotland. The Scottish Government have indicated that they are looking at a separate band for innovative offshore wind generation in deep waters.
It is also worth noting that in Northern Ireland the ROC scheme was introduced later in 2005; it is the responsibility of the Assembly’s Department of Enterprise, Trade and Investment. Again, there are some differences between ROCs in Northern Ireland and other parts of the UK—for example, their treatment of anaerobic digestion. However, Northern Ireland is in a slightly different position, in that it is part of an All-Ireland energy market, and different policies apply north and south of the border. As far as I am aware, the situation in Wales is the same as in England, but if I am wrong, no doubt my hon. Friend the Member for Ynys Môn will correct me.
The Scottish Government are clearly keen to maintain the considerable momentum that has built up within the renewable industry and want to ensure that there is no danger of that being interrupted as a result of uncertainty over CFDs. Any such delay would imperil the 2020 target for both Governments.
It seems to me that, given the differences that exist in the current system, there should be agreement between all the Administrations who have an interest in the way forward. While I appreciate that there have been considerable discussions between the Governments on the issue, given the concerns over the changes from ROCs to CFDs, there should be agreement on a way forward.
From the information we have at present, we do not know, for example, whether CFDs will work for all renewable technologies—in particular, less mature technologies which are likely to need greater support in the short term. Examples might include wave and tidal technologies. I stress that the concerns might be solved once the strike prices are available, but at present we have no idea what these will be, and in the absence of any provision in the Bill there is no way to revisit the matter concerns arise over the level of those.
My amendment therefore seeks, rather than putting a date on the decision, to make it conditional on agreement between the Governments on the matter. Both the Scottish and the UK Governments are keen to ensure that CFDs are made to work. I hope that these matters can be dealt with fairly amicably. It is in no one’s interest to cause further uncertainty in the energy market. I am pleased to note that RenewableUK has lent its support to the amendment.
I mentioned earlier the point raised by the hon. Member for Rutherglen and Hamilton West in evidence sessions, about the three-year period being the important issue, rather than the specific date, and I accept that to an extent. I presume that that is the reason behind amendments 70 and 71, though I will be interested to hear what he says, because it does not seem to me that the amendments will achieve that.
The amendment is simply designed to tease out more information on how the Government intend to deal with the closure date of 2017, because there could be uncertainty and a hiatus in investment, and until the full details are known, we simply do not know what the situation will be.

Tom Greatrex: I have some sympathy and agreement with the sentiments expressed by the hon. Member for Angus, though not necessarily with the detail of his amendments. Amendments 70 and 71 are designed to address the same issue as amendment 10, but in view of the vagueness around the definition of when something is agreed and in relation to
“operating to a level acceptable to both government and developers”,
I am not completely convinced by amendment 10. I understand the intent, because Committee members will all have heard in the evidence sessions the concern of both the big operators and the Low Carbon Finance Group and others that the uncertainty over the detail of CFDs—the Minister referred to the hope that the detail would become apparent—may cause investment decisions to be slowed down, if not paused.
We should not neglect the point about the time frame for making some of these decisions. Taking into account the planning process and the many other factors, many decisions that will be relevant for 2017 will be being made now or very shortly. It may seem a decent amount of time until 2017—four years—but it is not necessarily that long a time frame in the context of such investment decisions.
We will all have heard concerns from people in the industry, and particularly the renewables industry, about the detail and the time scale. The argument was advanced at one point that we should extend to 2020—a point that the hon. Member for Angus put to a number of witnesses last week. He will have gathered, as did we all, that there was perhaps less of a desire to be wedded to a certain date and it was, as became apparent from the answers to some of the questions that I put, perhaps more to do with the time scale.
That is why amendment 70 is designed to ensure that, along with the period of 36 months that is currently envisaged by the Government between the CFD being first proposed and its becoming operational, there is a transition period, with the two mechanisms running in parallel.
I understand the point that the hon. Member for West Aberdeenshire and Kincardine made in his intervention, that there is a potential impact on consumer bills, but we will not know exactly what that will be until we have seen a bit more detail. The parallel, transitional arrangement is a good mechanism. Amendment 70 seeks to preserve the time scale that the Government envisaged. It may well be that there are delays and that some aspects of secondary legislation prove slightly more difficult. It may be that some of the decisions that still need to be made in relation to state aid considerations take longer than the Government hope. All those reasons could leave us in a situation where we have passed the primary legislation, but the secondary legislation is slightly delayed and CFDs are therefore unable to become operational at a time that the Government envisage.
Therefore, preserving that transitional period for the same length of time gives the best amount of stability and predictability for people making those investment decisions, so that they can use either mechanism during that transitional time. If that time is not cut down while they still wait for detail, that should give us the best possible balance. The hon. Member for Angus quoted Keith Anderson from ScottishPower. He is right to say that he was quite enthusiastic about Contracts for Difference, but he made the point about the delay in the Bill and delaying the strike prices, therefore affecting decisions. Asked if a period of three years for parallel running was the best way, he simply said, “Yes”.
Andrew Buglass, who represented the Low Carbon Finance Group and, as hon. Members will know, leads in that area for RBS, which is still the biggest investor in renewable energy, made the same point: that it was not particularly about the date. If there was no delay, 2017 would be fine, but if there was to be a delay, he thought it would cause some difficulties from an investor’s perspective. Therefore, amendment 70 is designed to preserve that three-year period. It reflects the concerns expressed to us last week, but does not seek to undermine the overall approach. It is in accordance with the point that was made about the potentially better affordability of long-term contracts under CFDs than under the renewables obligation. It would address the same potential flaw in a better way, I suggest, than amendment 10.

Alan Whitehead: We discussed this morning likening the Minister to Henry VIII. I draw the Committee’s attention to Henry VIII’s Lord Chancellor, Thomas Cromwell. The Minister might think a little more about him. After a brush with parliamentary scrutiny—admittedly over a longer period than the Committee has—he famously stated,
“we have done as our predecessors have been wont to do, that is to say, as well as we might, and left where we began.”
I hope that the Minister will not end up like Thomas Cromwell—in more ways than one, since Thomas Cromwell did not end up very well. I also hope that the Minister will not end up where we began, because there is a sense that the Department decided very early in the scrutiny of the draft Bill that the date for ending the RO and the beginning of the RO parallel market, with no new entrants to RO, would be 31 March 2017. Come what may, vicissitudes notwithstanding, delays in legislation and in the detail of material coming before us notwithstanding, that date of 31 March 2017 for ending the RO has remained constant. There has been no shifting. The Department appears to consider that it will leave where it began as far as that date is concerned.
That is significant because that date has remained constant when there have already been substantial delays and diversions before the Bill reached its current position. It is suggested that it might be prudent to think about whether there will be further delays and discussions before the Bill completes its passage and goes through all its further processes of secondary legislation and we are in a position whereby we are completely ready to go with the CFDs, and are clear about what will happen to the RO. Well, several delays and changes have already taken place. A lot of time has already run out since the date of 31 March 2017 was first envisaged by the Department. We are up against the thinnest time that might be available for the parallel running of RO and CFDs.
That is important for those people who are thinking right now about how they will proceed with their renewable developments. As has been mentioned this morning, those large schemes, for example, those round 3 schemes on offshore wind, are not schemes that they can decide to go ahead with on 1 March 2017. Probably a number of those decisions about to whether to go ahead and in what form will be taken in the next six months to a year. As things stand, they may well have to be taken with a profound lack of clear information about what lies ahead for the project.
There is no clear knowledge of strike price, no clear knowledge of reference price, no clear knowledge of how CFDs will bed down and there are no details at the moment even of investment instruments and how they might assist those schemes. Whatever one may think of the relative merits or ultimate benefit of CFDs and the renewables obligation, at least the renewables obligation is understood by the market and people know that if they get one for their project it makes the project a pretty firm arrangement. So do they try and rush their decisions to get a renewables obligation between 31 March 2017, even based on the knowledge and information they have at the moment, or do they say, “Let’s take a leap of faith and put off our project decision making and hope that the details on the CFDs will work out in the way we think they will work out so that we can take an investment decision after 31 March 2017 on a fairly secure basis”?
The feeling at the moment among many offshore wind investors, particularly large project investors, is that they are so uncertain about exactly what is happening with the CFD regime that they face a big dilemma with regard to their investments. The potential is there for those investments simply to stop and for a hiatus at a crucial period for those renewable investments for the future. As we rush towards 31 March 2017, without the clarity that people expected to be available by now, uncertainty increases.

Peter Aldous: I have some sympathy with the hon. Gentleman’s point, because significant round 3 wind farms are proposed off the East Anglian coast. Does he agree that the main thing that came out of the evidence was the importance of the strike prices being announced in a timely fashion in the middle part of this year?

Alan Whitehead: The hon. Gentleman is absolutely right that getting that certainty into the decision-making processes leading to investments is important. Among other things, an early announcement and early clarity on the strike price clearly feeds through positively into investors’ confidence that they can actually invest on the basis of knowing what is in front of them.
However, it is by no means clear and there have already been delays in that process and other processes as far as future arrangements are concerned. That particularly worries me right now. Can we say, hand on heart, that everything will go absolutely according to plan over the next period? Some thought that the Bill would have been before the House some 18 months ago and that things would have proceeded to an entirely different timetable.
Indeed, one of the big delays, which we may reflect on, was at the heart of the 31 March decision that DECC took early on, because the ending of the renewables obligation and the arrival of CFDs meant that a different group of investors would be involved in decision making on CFDs, particularly a new group of investors that were ineligible for the RO—those involved in nuclear power development. They will be eligible for CFDs. When the 31 March 2017 date was first envisaged, the time scale for the beginning of power generation by the nuclear sector was the beginning of 2018. I have on the wall in my office the confident time scale put to the Government by EDF for when their new nuclear power stations will be producing energy, which is January 2018, so CFDs will need to be in place by then in order for them to be in that regime.
I believe—there is much evidence to support this—that the 31 March 2017 date came about, at least in part, with that consideration in mind. A new regime had to be in place by then to encompass new nuclear, so that date was agreed on. However, we know now that there will be no new nuclear on 1 January 2018. That has been substantially delayed. That is what happens in such considerations—perhaps more so with nuclear—and the idea that there will be no delays and that we can henceforth confidently say that a three-year time scale can be adhered to is a fragile claim. Come what may, we need certainty over that three-year time frame. To enable those investors to take their decisions with more certainty of time scale, even if there is some uncertainty about detail in the future, seems to me an important way forward.
I hope that the Minister will say that he has thought about this puzzle of 31 March 2017 and why it has been so tenaciously adhered to and recognise that he should not leave off where he began and should consider that the certainty of a three-year run-in period is a better prospect for investment clarity than the current arrangements. If he can do that, he will among other things send out a signal to investors that we really mean business about the next stage of renewables investment. We want to give the maximum possible certainty for such investment, in the context of the changes currently being made, and I hope he will agree that this modest change will be to investors’ advantage as well as ours.

Barry Gardiner: My hon. Friend the Member for Southampton, Test is absolutely right. At the centre of the amendments is the issue of certainty or uncertainty. It is interesting that, earlier on in the discussion, when I said that the problem with the Bill is that it does not deal with the way in which energy and energy policy are connected with wider industrial and manufacturing policy, the Minister said “No, no,” and quoted remarks about the need to get certainty into the system and the way in which contracts for difference might do that. That is part of the process of this Bill, and it is partly the reason why it must go ahead, but in a better form. This is precisely the area where the certainty that the Minister acknowledged was necessary to incentivise the investment community and the supply chain is absolutely vital. He used to be the Minister for Further Education, Skills and Lifelong Learning, and he knows well the time it takes to get the supply chain and the skills that are needed in it in place. This should come as no surprise to him whatever.
A fixed end point that will be increasingly curtailed absolutely does not give industry the security that it needs to make those final investment decisions that the hon. Member for Angus spoke of. The companies that need to take those final investment decisions, and that will increasingly need to take them over the coming months, need to know that there is a clear return on their investment—the ROCs give them that. It is absolutely the Government’s prerogative to change the system—to replace ROCs with contracts for difference—and nobody here will gainsay that, but to introduce an element of uncertainty and a caesura in business so that it has to say, “No, we have to hold back taking our investment decision, because we can’t see exactly what it is we will be getting for a return on our investment,” is precisely to separate energy policy from wider industrial policy and growth and economic stability in this country. That would be a big mistake.
Let us be clear: this is not a major concession. I have no doubt that we will call on the Government to make major concessions in this Committee, but this is not one of them. It is a sensible amendment to achieve what the Government have already said they want to give—three years. I am sure the Minister is sufficiently of an age—like you and me, Mr Bailey—to recall when we went to school with slide rules. We did not have calculators in those days. I am asking him to pull out that bit of the slide rule and enable the clause to reflect the same distance at any time, until investors have the certainty of knowing what their strike price is. It is essential for investors, for a wider industrial policy and for economic growth in this country, and the Minister should accept the amendments.

John Hayes: I was reflecting for a moment on those halcyon days of slide rules and Rupert Bear annuals, but we will not go down that road.
I am grateful to hon. Members who have contributed to this important aspect of our consideration. On amendment 10, it is right that we ensure the best possible arrangements for new and existing renewable energy developments. That is central to our purpose. We see renewable energy as an important part of the energy mix necessary for energy security, because of the sustainability and resilience it offers. I share the enthusiasm of those who contributed to the debate to make that as practicable and attractive as possible. The associated work being done by my Department alongside the Bill is designed to ensure that attractiveness and practicality. The Government remain confident, as the hon. Member for Brent South predicted—

Barry Gardiner: North.

John Hayes: I am sorry, forgive me. He predicted that I would say that contracts for difference provide the most efficient long-term support for renewable generation. They give greater certainty and stability of revenues by removing exposure to volatile wholesale prices, and protect consumers from paying for support when electricity prices are high. I do not bear the hon. Gentleman any undue ill will but, slightly contrary to his comment, the Low Carbon Finance Group, when challenged on that very matter during the evidence sessions said,
“Great progress has been made in terms of the existing arrangements around, for example, the renewables obligation and the way in which the transition will happen, so that investors still looking to bring forward projects under that framework will be able to take comfort from that.”––[Official Report, Energy Public Bill Committee, 15 January 2013; c. 46, Q141.]
The evidence suggests that the mechanisms we have put in place are indeed sufficient to imbue the industry with sufficient confidence to plan in exactly the way that those remarks suggest. Scottish Power said,
“Our perspective has always been that it was a fantastic move to have contracts for difference coming in and allowing the renewables obligation to carry on so that you have an overlap of three years.”––[Official Report, Energy Public Bill Committee, 15 January 2013; c. 21, Q54.]
It is worth pointing out that there are just under three years to sign a CFD, from 2014 to 2017, but full contract details and draft renewables strike prices are available from this summer, from July 2013, almost four years before the RO closes. That is not a hurried process by any measure.
I understand the argument and I am grateful for the consideration of it. We have heard the argument put a number of times. We believe that we are on a timetable to deliver the mechanism well in advance of the intended closure date for new entrants to the renewables obligation. We are working closely with the devolved Administrations. I do not mean this unkindly, but I note in the hon. Gentleman’s amendment the assumptive use of the word “agreed”. We will work alongside all the necessary partners to ensure that CFDs are fit for purpose and build a solution that is acceptable. We do not think it necessary to impose preconditions on the timing of the renewables obligation closure or the means by which the decision is taken in the Bill.

Barry Gardiner: Everybody in the Committee accepts that the Minister does not think it will be necessary. That is not the issue. The issue is whether it is possible that it might be necessary. If that is possible, the Minister should allow industry that certainty. The amendment would ensure that.

John Hayes: That is a fair point. All I would say—and in a sense it is a reflection of our considerations so far—is that the Government are keen to offer the kind of certainty that has been called for this morning, and are also keen to make information available. It is perhaps worth putting on record that details of electricity market reform have been published with an exciting regularity. In July 2011, there was the White Paper; in December 2011, there was the decision on the capacity market rationale; in May 2012 there was the draft Bill, the CFD operational framework and further details on the capacity market; November 2012 saw the publication of the full details of the Bill, the CFD heads of terms, the key elements of the CFD contract and further details on capacity market; and further details on CFD were also published in July.
There is a determination to make this information available, not just because it is important for the scrutiny that the Committee wishes to exercise and the House wishes properly to enjoy, but because of the very important point that has been made emphatically by the hon. Members for Brent North and for Southampton, Test, that the message that sends out, in terms of investment certainty, is vital. Our determination to provide clarity is based on making sure that we are doing things properly with regard to this place, but we also understand the argument in business planning terms. The hon. Member for Brent North made the point that I was a Minister in the Department for Business, Innovation and Skills; I have also been a business man, and I know that in business planning it is important to know the context in which one is making investment decisions. We are thus determined to try to make that context as clear as possible. The overlap is sufficient that businesses will, in the interim period, have a choice about what they do. As we have been very clear about the matter from a long time out, that is sufficient, and there is no need for further amendments.
I extend my thanks to the hon. Member for Rutherglen and Hamilton West for tabling amendment 70 and putting his points on the record. Given that we are looking to ensure that the contracts for difference are fit for purpose and deliver a solution that is acceptable to all, I hope that the hon. Gentleman will feel that the reassurance I offered on amendment 10 is sufficient to allow him to withdraw amendment 70. I would add that an RO closure date in 2017 would itself provide at least a couple of years of parallel running of the two schemes.
On amendment 71, as hon. Members are aware, the Bill provides for the role of the purchasing body and levy administrator under the RO transitional arrangements to be carried out by Ofgem and the Northern Ireland Authority for Utility Regulation. The power to transfer those roles to a CFD counterparty simply provides the option of combining the roles with CFD functions performed by the CFD counterparty. That was thought to be a more appropriate measure given the future role of that body. It makes sense to put such an option in place while making legislative provision for the CFD counterparty.
The proposed amendment would limit the circumstances in which the functions could be taken away again from the CFD counterparty, if the option was exercised. That could prevent the Government from being able to act quickly in unforeseen circumstances of the kind I mentioned earlier, potentially jeopardising the smooth running of the RO transitional arrangements. There is an argument to be made here, but frankly I felt that the evidence sessions did not give it further legs; if anything what a number of witnesses said about the transitional arrangements was reassuring. There is no intention to make investment and business planning decisions more difficult—far from it. The Government are exercising every opportunity to broadcast a clear message about the circumstances in which those decisions can be made. On that basis, I hope that the hon. Gentlemen will withdraw the amendments.

Tom Greatrex: I heard what the Minister had to say, and I do not wish to disappoint him too often, but I was not completely convinced by his arguments on amendment 70, particularly in relation to the points he made about unforeseen circumstances. If there are no unforeseen circumstances, the amendment does not present any difficulty, but if there are unforeseen circumstances that delay either the strike price—I know what he said about July this year—or any other aspects that delay the commencement date for CFDs, that will affect that three-year period.
The Minister is right to say that, in the evidence session, people generally made the point that they thought that the contract for difference was an improvement. I think that I remember the representative from Siemens saying that the ROC regime was due for renewal, or words to that effect. Every person who was pressed on this, however, made the point that, in terms of transition, the three-year period was important to them. If there is no delay, the amendment would not make any difference because things would proceed as the Government intend—and we hope that they will—so accepting the amendment would not cause the Government any difficulties.
If there is a delay, however, with unforeseen events—recent years should warn us that unforeseen events and factors can come into play—the amendment provides for a better position and more clarity for those people that we heard from last week. I go back to the point made by my hon. Friend the Member for Southampton, Test, who said that when other things, such as the passage of the Bill and an agreement between the Government and EDF, for example, were envisaged, there were a range of dates that the Government have not been able to meet. That was not necessarily their fault; sometimes that was for the good reason of stopping, reflecting and coming back, as we saw with the good decision to have pre-legislative scrutiny.
For all of those reasons, there is the potential that something could be delayed. The amendment gives investors and the renewable industry a degree of comfort that there will be that period of time for the parallel running of the two regimes. To go back to the point made by the hon. Member for West Aberdeenshire and Kincardine, it would not place an arbitrary date in the Bill and, therefore, it would not have an undue impact on costs, and costs to consumers, because it is keeping to exactly the same time frame that the Government envisage. For that reason, I wish to press amendment 70.

Hugh Bayley: That has been noted by the Chair.

Michael Weir: As this morning has gone on I was beginning to think that I had wandered into a reconstruction of “Wolf Hall”. I do not accept the point made by the hon. Member for Rutherglen and Hamilton West about my amendment. It is clear that it is an agreement between the Governments as to when CFDs are up and running. I am not convinced that his amendment does what is necessary, though I accept that it would be an improvement.
The Minister is right that some doubt was expressed in the evidence sessions. Indeed, I referred to that myself, but the important word throughout the sessions was “if”: if everything went well, there would not be a problem, but, if there was any slippage, there was the clear possibility of a problem. This is an important issue, which I would also like to push to a vote.

Amendment 10 negatived.

The Chair adjourned the Committee without Question put (Standing Order No. 88).

Adjourned till this day at Two o’clock.